The Philadelphia Federal Reserve Bank said its business activity index jumped to 22.3 in September, the highest since March 2011, from 9.3 in August. That easily topped economist expectations for a reading of 10.0.
Any reading above zero indicates expansion in the region's manufacturing. The survey covers factories in eastern Pennsylvania, southern New Jersey and Delaware.
The new orders index vaulted to 21.2 from 5.3, also a 2½-year high, while employment hit a 17-month high of 10.3 from 3.5. Prices paid also rose, climbing to 25.30 from 17.30.
The survey showed respondents were also unusually optimistic, with the six-month business conditions index jumping to 58.2, the highest since September 2003, from 38.9 in August.
The survey comes a day after the Federal Reserve surprised financial markets by opting not to reduce its monetary stimulus. The U.S. central bank said low inflation, the impact of higher interest rates on housing and fiscal retrenchment in Washington were reasons for caution.
The manufacturing sector, however, has started to show signs of life, underscoring the uneven nature of the U.S. recovery. The regional strength seen in the Philadelphia Fed's survey comes after data from the Institute for Supply Management showed the national factory sector grew at its fastest clip in more than two years in August.
The Philadelphia Fed survey is one of the first monthly indicators of the health of U.S. manufacturing leading up to the ISM's national report. The September report is due Oct. 1.